I am about to embark on my first subdivision, in the City of Casey, Melbourne. There is an existing property at the front of block (650sq m) and I am looking to build at the back.

My mortgage broker tells me that most developers build the additional dwelling first and then subdivide as it works out cheaper? I have no idea why and how much could expected to be saved.

I will ask my broker for more information but any advice in the meantime on whether it is cheaper to build the second dwelling first and then subdivide would be very much appreciated. Many thanks in advance.

Maybe it's a staging/finance thing?
But usually it's better to subdivide first, if you can create a block that doesn't need a planning permit to later build on (usual +300sqm, but may depend on the planning controls).
If you can do this, you don't need development plans/drawings for the new house - it's a straight subdivision. Also eliminates (almost completely_ the possibility of objections - hard to object to a subdivision, easy to object to a proposed building.
Usually much faster as well.
By subdividing, you value add to the property immediately, without any building.
In my experience people subdivide first if they can, and then avoid dealing with planners later. But it will depend a little on planning controls

My mortgage broker tells me that most developers build the additional dwelling first and then subdivide as it works out cheaper? I have no idea why and how much could expected to be saved.

Click to expand...

It really depends on the council, some Melbourne councils will charge you a 'services' or 'utilities' fee when you subdivide that can be over $50,000. I would talk to a town planner who knows the area and get the actual numbers to see how the two options stack up.

Do you have an investment savvy mortgage broker? They may be biased to receive their commission earlier.

Subdivide first: increase value of asset quickest = able to refinance/draw out equity to fund construction.

In my experience (in WA) there are more ppl who are able to do the latter (as it requires less equity/cash to start) but greater profits in the latter (start generating a rental return sooner).

Click to expand...

Watch out for split zoning rules of various councils. Sometimes they will determine the order. For example, my block in City of Belmont is R20/40. To get to R40, I have to demolish the existing dwelling. For a retain and build, I can only subdivide to R30. So subdivide first then build is not feasible for that scenario. However, I can build first and then strata. It doesn't make a lot of sense but the rules are the rules

Watch out for split zoning rules of various councils. Sometimes they will determine the order. For example, my block in City of Belmont is R20/40. To get to R40, I have to demolish the existing dwelling. For a retain and build, I can only subdivide to R30. So subdivide first then build is not feasible for that scenario. However, I can build first and then strata. It doesn't make a lot of sense but the rules are the rules

For me on it came down to valuations. Getting valuations to work with the amount I needed to borrow without putting cash in myself for the build. Splitting the block first then valued as 2 houses on seperate titles came up better then 2 houses on the same title.

Subdivide first: increase value of asset quickest = able to refinance/draw out equity to fund construction.

In my experience (in WA) there are more ppl who are able to do the latter (as it requires less equity/cash to start) but greater profits in the latter (start generating a rental return sooner).

Also tax implications (esp if it is your PPOR) and other things you will have to consider (what titles do you want at the end?)

Click to expand...

Ahaha yes, thanks @Azazel , I meant: my experience (in WA) there are more ppl who are able to do the LATTER (as it requires less equity/cash to start) but greater profits in the FORMER (start generating a rental return sooner).

Ahaha yes, thanks @Azazel , I meant: my experience (in WA) there are more ppl who are able to do the LATTER (as it requires less equity/cash to start) but greater profits in the FORMER (start generating a rental return sooner).

Featured Business Members

Hi, I'm Steven. I built $2.5mil property portfolio by age 30, then quit my job and launched INTERSTELLAR Finance to help investors. Want to chat and see what's possible for you? I'd love to hear from you :) Book a free consultation via the site:

Are you looking to build a property portfolio? If so, are you looking for guidance and someone to hand hold you through the process? Hi, I am Sana Ali from Property Twins. I help people set up with finance correctly to build their property portfolio.

Not all insurance is the same. Whether loss of rent due to a defaulting tenant, malicious or accidental damage or circumstances including tenant hardship and death of a tenant, EBM's RentCover insurance protects owners like no other policy.

Property Investing is a game of finance. Learn how to play and you’re far more likely to win! In this FREE E-book, discover the finance secrets to double your borrowing power and grow a more successful investment portfolio.